SEC Commissioner Aguilar Calls for Larger Commission Role in FSOC

In a speech at the Mutual Fund Directors Forum’s annual Policy Conference, SEC Commissioner Aguilar criticized the FSOC and OFR for undercutting the Commission’s role in regulating the mutual fund industry. Commissioner Aguilar discussed the widening scope of the FSOC’s interest in the mutual fund industry, including FSOC’s charge to the Office of Financial Research (OFR) to review the activities of the asset management industry to assist in determining whether asset managers should be designated as SIFIs. Commissioner Aguilar was highly critical of the September 2013 report, saying “OFR published what it considered a study of the asset management industry.” He noted that it was the SEC, not the FSOC or OFR, that solicited comments on the report. In summarizing the comments on the report, Commissioner Aguilar stated that the report received “near universal criticism from academics, investor advocates, lawmakers, asset management firms, industry groups, and others.”

In addition to his concerns about the report specifically, Commissioner Aguilar also focused on structural concerns about the relationship between the SEC Commissioners and the FSOC. He stated that while the SEC Chair (or her designee) participates in the FSOC and that the SEC staff works with the staff of the other participating agencies, there is no role for the Commissioners despite the Commission’s expertise with the securities laws. He called for a mechanism to allow direct participation in the FSOC by the Commissioners because “[c]learly the expertise and judgment that the securities laws imbues in the presidentially appointed, Senate-confirmed Commissioners is undercut when there is an end-run around the Commissioners tasked with running the SEC.”